Can regional integration accelerate development in Africa? : CGE model simulations of the impact of the SADC FTA on the Republic of Madagascar / prepared by Jean-Jacques Hallaert
I. Introduction; II. Madgascar Trade Patterns and Trade Policy; Tables; 1. SADC and COMESA: Overlapping Memberships; III. Joining SADC: Process And Motivations; 2. Planned Reduction in Madagascar Customs Tariff on SADC imports; IV. The Impact of the SADC FTA; A. Model and methodology; 3. Region and Industry Aggregation; B.A marginal impact on GDP and welfare; 4. Impact on Real GDP; C.A trade diverting or a trade creating FTA?; 5. Change in Real Wages in the SADC; 6. Change in the Terms of Trade; D. Why the SADC FTA does not boost Madagascar GDP
7. Change in Volume of Trade of SADC members8. Decomposition of the Change in Real GDP; E.A substantial change in the structure of trade; 9. Change in the Geographical Structure of Trade; 10. Change in Madagascar Trade Balance; F. Resource allocation: A shift to the textiles and clothing industry; G. What can be done to maximize the gains from the SADC FTA? The role of domestic policies and multilateral liberalization; 11. Demand for Factor of Production in Madagascar; 12. Impact of the decline in the price of capital; V. Conclusion; 13. SADC and multilateral liberalization; References
AppendixesI. Origin of Madagascar Imports; II. Decomposition of the Welfare Effect; III. Change in SADC Direction of Trade; IV. Change in Real Value Added by Sector; V. Change in Madagascar Structure of Trade; VI. The GTAP Model
Summary
Madagascar plans to start phasing out its customs tariffs on imports from the Southern African Development Community in 2007. This paper uses a CGE model to evaluate the impact of the SADC FTA on Madagascar economy. The results suggest that the SADC FTA would only have a limited impact on Madagascar's real GDP because the liberalization affects only a small share of its total imports. However, Madagascar's trade and production pattern would change and benefit the textile and clothing sector. Removing rigidities in the labor and capital market would increase the gains but they would remain limited. Gains from the SADC FTA become substantial only when the regional liberalization is accompanied by a multilateral liberalization
Bibliography
Includes bibliographical references (pages 22-24)
Notes
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